Ok I tried the official Spotify app with the latest version of Squeeze Control (the one that's going through the approval process right now) and selected a song and it seems to work. Well at least it added to song to the playlist and Squeeze Control didn't disconnect. However, I can't actually get it to play, since the official Spotify app only supports the SB Radio and SB Touch and I have neither.

Ok I just tried the currently available version of Squeeze Control with the official Spotify app and the playlists seem to work fine. My guess is that either the playlist name or one of the songs inside has a name that has non-english characters. The current version of SqzCtrl can handle some types of those characters but not all. The upcoming version has a fix, specifically for that problem.